MPs for Sale? Returns to Office in Postwar British...

American Political Science Review Vol. 103, No. 4 November 2009

doi:10.1017/S0003055409990190

MPs for Sale? Returns to Office in Postwar British PoliticsANDREW C. EGGERS Harvard UniversityJENS HAINMUELLER Massachusetts Institute of Technology

Many recent studies show that firms profit from connections to influential politicians, but less isknown about how much politicians financially benefit from wielding political influence. Weestimate the returns to serving in Parliament, using original data on the estates of recently

deceased British politicians. Applying both matching and a regression discontinuity design to compareMembers of Parliament (MPs) with parliamentary candidates who narrowly lost, we find that servingin office almost doubled the wealth of Conservative MPs, but had no discernible financial benefits forLabour MPs. Conservative MPs profited from office largely through lucrative outside employment theyacquired as a result of their political positions; we show that gaining a seat in Parliament more thantripled the probability that a Conservative politician would later serve as a director of a publicly tradedfirm—–enough to account for a sizable portion of the wealth differential. We suggest that Labour MPs didnot profit from office largely because trade unions collectively exerted sufficient control over the partyand its MPs to prevent members from selling their services to other clients.

“We are not supposed to be an assembly of gentlemenwho have no interests of any kind and no associationof any kind. That is ridiculous. That may apply inHeaven, but not, happily, here.”

—–Winston Churchill, characterizing the House ofCommons in 1947

In October 1989, Nigel Lawson resigned after sixyears as Chancellor of the Exchequer under Mar-garet Thatcher. Four months later, while still a

Member of Parliament (MP), Lawson was named anonexecutive director at Barclays Bank with a salaryof 100,000 British pounds (GBP)—–roughly four timeshis MP pay. The afternoon the appointment was an-nounced, Barclays’ market value rose by nearly 90million pounds (Hollingsworth 1991, 150).

Such anecdotes suggest that political connectionscan be of great value to private firms. In a numberof recent papers, scholars have begun to systematically

Andrew C. Eggers is a Ph.D. candidate, Department of Government,Harvard University, 1737 Cambridge Street, Cambridge, MA 02138([email protected]).

Jens Hainmueller, a Ph.D. candidate at Harvard University whenthis article was accepted, is now Assistant Professor, Depart-ment of Political Science, Massachusetts Institute of Technology, 77Massachusetts Avenue, Cambridge, MA 02139 ([email protected]).

Authors are listed in alphabetical order and contributed equally.Both gratefully recognize the support of Harvard’s Institute forQuantitative Social Science.

This paper received the 2009 Robert H. Durr Award from theMidwest Political Science Association for “the best paper applyingquantitative methods to a substantive problem.” A previous ver-sion was circulated under the title “The Value of Political Power:Estimating the Returns to Office in Post-War British Politics.” Wethank Alberto Abadie, Jim Alt, Sebastian Bauhoff, Ryan Bubb,Jeff Frieden, Adam Glynn, Justin Grimmer, Torben Iversen, MikeKellermann, Gary King, Roderick MacFarquhar, Clayton Nall, Ric-cardo Puglisi, Kevin Quinn, Jim Robinson, Don Rubin, Ken Shepsle,Beth Simmons, Patrick Warren, three anonymous reviewers, the ed-itors, and seminar participants at Harvard, MIT, the Penn State NewFaces in Political Methodology Conference, and the NBER PoliticalEconomy Student Conference for helpful comments. For excellentresearch assistance, we thank Matthew Hinds, Nami Sung, and DianaZhang. We would especially like to thank Jim Snyder, who directlyinspired this project. The usual disclaimer applies.

examine this value in a variety of settings. Firms withpersonal and/or financial connections to politicianshave enjoyed higher stock valuations in Indonesia(Fisman 2001), the United States (Goldman, Ro-choll, and So n.d.; Jayachandran 2006; Roberts 1990),Malaysia (Johnson and Mitton 2003), and NaziGermany (Ferguson and Voth 2008). In the UnitedStates, politically connected firms are more likely tosecure procurement contracts (Goldman, Rocholl, andSo 2008), and in Pakistan, they are able to draw morefavorable loans from government banks (Khwaja andMian 2005). Faccio (2006) shows that the benefits ofpolitical connections are larger in countries with highercorruption scores.

In this article, we approach the market for politi-cal favors in the UK from the opposite perspective.Where others have focused on the benefits companieslike Barclays obtain through connections to powerfulpoliticians, we analyze the benefits politicians like Law-son obtain on the basis of their political power. If firmsbuy political favors, and if they do so in part by pro-viding employment, gifts, or bribes to politicians, thenpoliticians can be expected to benefit financially fromoffice just as firms do from connections to officeholders.We attempt to measure this benefit by examining theeffect of serving in Parliament on the estates of Britishpoliticians who entered the House of Commons be-tween 1950 and 1970, and have since died.

Measuring the value of political power is difficultin part because detailed data on politicians’ personalfinances is generally not available. Even where it is, asin the U.S. Congress since the early 1990s, we generallydo not have good data about income or wealth afterthe member leaves office, when much of the financialvalue of political power may be realized (Diermeier,Keane, and Merlo 2005). Even if we knew a givenMP’s income from all sources over the course of hisor her life, it would still be difficult to determine whatportion of those payments were a result of his or herpolitical power. MPs are not randomly selected fromthe population (which is unfortunate for researchers,but arguably beneficial for citizens), so a comparisonof MPs’ income or wealth with that of a peer group

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outside politics is likely to reflect factors that led MPsto gain political office as well as the value of politicaloffice itself.

Our strategy for addressing these problems is tocompare the wealth (at death) of MPs with that ofpoliticians who ran for Parliament unsuccessfully. Vot-ing, not randomization, decides which candidates winelections; we address the resulting selection problemin two ways. First, we employ conventional methods ofcovariate adjustment (matching and regression) to con-trol for imbalances in key candidate-level confoundingfactors recorded in our data set, including age, occu-pation, schools and universities attended, and titles ofnobility. Second, we employ a regression discontinuitydesign (Lee 2008; Thistlethwaite and Campbell 1960),exploiting the quasirandom assignment of office in veryclose races to estimate the effect of office on wealth.Our estimation strategies yield the same basic result:serving in Parliament was quite lucrative for MPs fromthe Conservative Party, but not for MPs from the rivalLabour Party. Conservative MPs died almost twice aswealthy as similar Conservatives who unsuccessfullyran for Parliament; no such difference is evident amongLabour politicians.1

Our identification strategy and rich set of covariatesmake us quite confident that the difference in wealthwe observe between winning and losing candidates isdue to serving in Parliament itself (as opposed to back-ground differences between successful and unsuccess-ful politicians); however, estimating that effect alonedoes not tell us how serving in office increased wealthfor Conservative politicians. Serving in political officecould affect one’s wealth at death through many chan-nels, including official perquisites (the office could pro-vide a salary and in-kind payment different from whatone could earn in the private sector), lifestyle changes(a life of politics could shape one’s consumption pat-terns or bequest motive), and health (the stress or gloryof being in Parliament might affect how long one accu-mulates and depletes savings). Our investigations sug-gest that these pathways do not account for the wealthgains we observe among Conservative politicians. Theofficial perquisites of office were modest in the periodwe examine, particularly compared to salaries in the oc-cupations that Conservative candidates typically heldbefore standing for office. We know of no particularlifestyle changes made by Conservative MPs that wouldsubstantially affect their personal finances or bequests.2Our analysis also reveals no effect of winning office onlongevity.

We suggest that office was lucrative for Conservativepoliticians because it endowed them with political con-nections and knowledge that they could put to personalfinancial advantage. We show that winning office more

1 As discussed later in the article, our estimate measures the effectof power on bequest size; some consideration is required to translatethat effect into the effect on earnings.2 A possible exception is that MPs were probably more likely tolive in London, which may have required a greater outlay of livingexpenses than living elsewhere, but which also may have exposedthem to career and investment opportunities to which they wouldnot have otherwise had access.

than tripled the rate of corporate nonexecutive direc-torships among Conservative politicians; back-of-the-envelope calculations suggest that this difference in thenumber of directorships alone can account for a sizableportion of the wealth differential between MPs andunsuccessful candidates from the Conservative Party.MPs were evidently valuable to firms as directors andconsultants because of their political knowledge andconnections, a finding that complements evidence fromseveral other studies showing that political connectionsadd value to firms. (For example, in the U.S., Goldman,Rocholl, and So [n.d.] finds that companies experiencea positive abnormal return when they announce thenomination of a politically connected individual to theboard of directors.)

We argue that the larger benefit enjoyed by Conser-vative MPs was due in part to differences in the way theparties were financed and organized. In the period inwhich these MPs were elected, the Labour Party wasfunded and dominated by a handful of trade unionsthat used their influence to secure the exclusive loyaltyof a large proportion of Labour MPs. The ConservativeParty, in contrast, gathered its financial support fromdiffuse contributors and had no dominant constituency,leaving MPs relatively free to forge relationships withnumerous outside firms that competed for their leg-islative services. MPs from both parties thus explicitlyprovided services to outside interests, but the tradeunions shaped Labour Party institutions such that theycould acquire those services without bidding for theservices of individual MPs.

Our article is among the first to provide direct empir-ical estimates of the financial rewards of political office.It is closely related to Querubin and Snyder (2008),who use census data to assess whether members ofthe U.S. Congress in the 19th century enjoyed fasterwealth growth than unsuccessful Congressional candi-dates. Our estimates speak to the “career concerns”literature in political science, including work on candi-date recruitment (Besley and Coate 1997; Fiorina 1994;Osborne and Slivinski 1996; Rohde 1979; Schlesinger1966) and candidate retirement (Diermeier, Keane,and Merlo 2005; Groseclose and Krehbiel 1994; Halland van Houweling 1995; Keane and Merlo 2007).The monetary benefit of office holding also appearsas an important parameter in numerous recent polit-ical economy models that examine the selection andbehavior of politicians (e.g., Besley 2005; 2006; Caselliand Morelli 2004; Dal Bo, Dal Bo, and Di Tella 2006;Mattozzi and Merlo 2007; Messner and Polborn 2004).There is no consensus in the theoretical literature onthe relationship between the financial rewards of po-litical office and the quality of policy making; rigorousempirical study of that relationship is only just begin-ning (see, e.g., Ferraz and Finan 2008). It is evident,however, that significant nonsalary compensation hasthe potential to shift MPs’ priorities away from theirofficial duties and toward the interests of client firms(Besley 2006; Gagliarducci, Nannicini, and Naticchioni2008; Thompson 1987). Our analysis furnishes the firstestimates of the total financial rewards of attaining leg-islative office (including nonsalary pay), demonstratesthat nonsalary benefits were a considerable part of

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those rewards in postwar British politics, and showsthat those rewards can vary depending on the organi-zation of interests in political parties.

We present our evidence and argument as follows.In the next section, we discuss the regulation of MPs’outside employment and other financial arrangementsin a comparative international context. Next, we in-troduce our data on the wealth of British politiciansand use these data to estimate the effect of serving inParliament on wealth. We then consider possible chan-nels through which MPs likely increased their wealth,focusing on opportunities for earning outside incomethrough consultancies and directorships, and considerpossible reasons why Conservatives and not Labouritesbenefited from these opportunities.

VALUE OF A PARLIAMENTARY SEATIN CONTEXT

Before embarking on our empirical analysis of the fi-nancial benefit of winning a seat in the House of Com-mons, it is worth illuminating the context surroundingMPs’ finances. No study has previously attempted toempirically determine the total financial rewards ofserving in Parliament, but there has been considerablecontroversy about and discussion of the financial livesof MPs that points to the significance of the topic andgives an idea of what to expect.

MPs earn salaries that are considered modest rela-tive to their counterparts in other countries and in com-parable professions within Britain (Baimbridge andDarcy 1999; Judge 1984), but there is a widespread pub-lic perception that some MPs use office to enrich them-selves by other means. A Gallup poll in 1985 found that48% of respondents believed that “most MPs make alot of money by using public office improperly”; by1994, when scandals surrounding parliamentary bribeshad become a prominent political issue, the proportionof respondents answering in the affirmative had risento 64%, while more than 80% believed it improper forMPs to accept payment for advice about parliamen-tary matters (which is, in fact, a common practice inParliament) (Norton 2003, 367).

Although outright bribery has occasionally beenthe focus of some attention (particularly in the “cashfor questions” scandal of the mid-1990s), most publicscrutiny has focused on the practice of MPs taking onoutside employment while in office. As in most otherparliaments, members of the British House of Com-mons are permitted to take on a variety of outside workwhile serving in office. Throughout the period sinceWorld War II, it has been common for MPs to serve oncorporate boards, act as paid “parliamentary consul-tants” for firms or industry groups, and draw stipendsfrom trade unions. Although the practice of MPs simul-taneously holding outside jobs is consistent with theconcept of parliaments as citizens’ assemblies, it haslong been recognized that these outside arrangementsmight conflict with MPs’ duties to serve the public inter-est and their constituencies. A number of exposes (e.g.,Doig 1984; Finer 1962; Hollingsworth 1991; Judge 1984;Noel-Baker 1961; Roth 1965; Stewart 1958) highlightedthese conflicts, often focusing on Conservative MPs,

who were reportedly more likely to acquire lucrativeoutside employment. Debates surrounding members’salaries and outside interests, taken up both in Parlia-ment and in the broader public sphere, presaged re-cent formal models on the issue of legislative compen-sation (e.g., Gagliarducci, Nannicini, and Naticchioni2008). Defenders of MPs’ outside interests argued thatmembers gained policy-relevant knowledge from theiroutside work and that banning parliamentary consul-tancies and directorships would drive the best MPs outof politics, while those advocating restrictions claimedthat limiting outside employment would reduce con-flicts and encourage sitting MPs to focus on their leg-islative work.

The House of Commons has addressed the potentialconflict between legislative duties and outside interestsby forbidding ministers from taking outside work and,since 1975, requiring other members to disclose anyfinancial interests or income that could be thought toinfluence their judgment or actions as MPs.3 Up to themid-1990s, it was not necessary to disclose the amountpaid by any outside source, and disclosure itself wasconsidered voluntary; as one MP stated in an inter-view in the mid-1980s, “If someone was up to some-thing they wouldn’t register it” (Mancuso 1995, 158).Starting in 1996, following a scandal in which mem-bers were caught accepting payments for raising issuesin Parliament, MPs were required to report amountsreceived from outside employment and expressly for-bidden from carrying out “paid advocacy,” but theirright to take on work as consultants and directorswhile in office (and any work whatsoever afterward)was protected. This approach may seem lax from theperspective of the present-day U.S. Congress, whosemembers are prohibited from taking on almost all out-side employment; face strict caps on earned income,gifts, and travel; and are prohibited from taking lob-bying employment during a “cooling off period” af-ter leaving Congress.4 Compared to other legislaturesinternationally, though, the UK’s regulations on con-flict of interest are quite typical (Faccio 2006).5 Whatis unusual is the closeness of connections betweenBritish MPs and British industry: Faccio (2006) esti-mates that 39% of British firms (by market capitaliza-tion) have politicians in the executive ranks or as major

3 The Register of Members’ Interests (1997), states that the definingpurpose of the register is “to provide information of any pecuniaryinterest or other material benefit which a Member receives whichmight reasonably be thought by others to influence his or her actions,speeches or votes in Parliament, or actions taken in his or her capacityas a Member of Parliament.”4 Committee of Standards of Official Conduct, House Ethics Manual,2008 edition.5 That regulations on British MPs are fairly typical is further con-firmed by a 1999 report (Whaley 1999) surveying codes of conduct,disclosure rules, and employment restrictions in twenty countries ofvarious levels of economic development. Although a comparablesurvey of regulations in earlier periods has not been conducted, itis worth noting that there was little difference in the regulation ofmembers’ outside interests between Britain and the US until thelate 1970s. Senators could serve on corporate boards until 1977, andmembers of the House as recently as 1990; a cap on outside earnedincome was first introduced in the House in 1977 and the Senate in1990. See Susan F. Rasky, “Plan to Ban Fees Spurs Lawmakers,” TheNew York Times, February 1, 1989.

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FIGURE 1. Members of Parliament Declaring Outside Interests (1975, 1990, and 2007)

Note: For each party the dots indicate the fraction of sitting MPs that declared at least one type of outside interest in a given year in theRegister of Members’ Interests. The dashed line refers to Labour and the solid line to Conservatives. See footnote 7 for details.

shareholders, making the UK the third most connectedcountry in her sample, behind only Russia and Thai-land.6

To provide a longer view of the extent of connec-tions between sitting MPs and business in the UK, werecorded the outside interests reported by MPs for 1975(the first year disclosure was required), 1990, and 2007.Figure 1 depicts the proportion of MPs, by party, whoreported outside employment as directors, journalists,or consultants, as well the proportion of MPs who re-ported other employment (i.e., unrelated to MP work),a union sponsorship, or significant shareholdings.7 The

6 Faccio labels a firm as politically connected if an MP or governmentminister is either a top officer or a large shareholder as of 2001.Her estimate may overstate the extent of connections in the UKin comparison to other countries because many of the connectionsshe observes involve members of the House of Lords, a largely cer-emonial body with no counterpart in most countries in her survey.(The “Register of Lords’ Interests” confirms that peers are highlyconnected to business; see, e.g., Jo Dillon, “One in Three Peers HasSeat in Boardroom,” The Independent, July 28, 2002.) Still, even ifhalf of the connections she records are attributed to the House ofLords and thrown out, the UK remains among the top five mostconnected countries in the survey.7 We used editions of the “Register of Members’ Interests” pub-lished on November 1, 1975, January 8, 1990, and March 26, 2007.

Details on each type of income, and our approach to recording it,are as follows: Directorships include only remunerated directorships.Consultancies include all remunerated consulting activities classi-fied as parliamentary affairs advisor, economic advisor, liaison offi-cer, public affairs consultant, parliamentary consultant, managementconsultant or advisor for firms when in connection to MP work,public relations consultant, public relations agents, and membersof parliamentary panels. Lloyd’s underwriter are also included. Weexcluded all consulting declared as unremunerated, charitable, orobviously unrelated to commercial lobbying (e.g., council work). Weincluded consultancy work for trade union–related groups. For 2007,we also included speech engagements that are clearly connectedto consulting work. Journalism includes any type of remuneratedjournalistic activity such as broadcasting, TV appearances, newspa-per, occasional journalism, novelists, documentaries, and scholarlyarticles, work as editor for the house magazine, and (especially in2007) also book contracts. We excluded unremunerated journalisticactivities and activities where fees are reported to be transferred tocharities. A union sponsorship typically consisted of a payment fromthe union to the local party organization of the MP’s constituency,usually to defray campaigns costs and operating expenses of theconstituency office, as well as a nominal stipend for the MP him- orherself (Mancuso 1995, 66). Employment includes regular employ-ment that is declared as unrelated to MP work, such as work as abarrister at law, a partner in a law firm, medical practitioner, farmer,family business, etc. We excluded work that is declared as infrequent(e.g., occasional work as Queen’s Counsel). MPs are required toregister shareholdings for any public or private company in which

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plots indicate that a considerable proportion of MPshad outside engagements but, as might be expected,there were stark differences in the types of engage-ments undertaken by Conservative and Labour MPs.Around half of Conservative MPs sat on corporateboards at each point examined, and around half re-ported employment as a “parliamentary consultant.”Labour MPs were much less likely to hold either kindof position but, up until the 1990s, were very likelyto be sponsored by a trade union. (The Labour Partyended union sponsorships in 1996, in part to sharpenits attacks on Conservatives’ outside financial deal-ings.8) Plenty of anecdotal evidence suggests that therough pattern of outside interests revealed by officialdisclosure starting in 1975 extends back well into the1950s and 1960s.9

To this point, we have considered outside employ-ment in which MPs have engaged while in office, butsome of the financial rewards of holding office proba-bly come after an MP retires from politics (whetherbecause payments for political services are delayeduntil they can more easily be hidden or because theMP continues to provide political services). A dis-tinct advantage of our research design (which usesprobate values as the outcome) is that it should mea-sure rewards MPs collect during their entire lives afterwinning office, including after they retire from politics.Because former MPs are not subject to disclosure re-quirements, far less information is publicly availableabout the employment opportunities they enjoyed af-ter leaving office than before. Looking at the U.S.Congress, Diermeier et al. (2005) conclude based on asurvey of former members’ first jobs after leaving officethat legislative experience confers a considerable boostin earning power.

they hold more than 15% of the issued share capital or shares worthmore than 100% of the official MP salary (e.g., 60,675 GBP in 2007).8 James Blitz, “Labour Poised to End Trade Union Sponsorship ofMPs,” Financial Times, February 28, 1996.9 Already in 1896, The Economist complained that “Notoriously,men are often placed on boards of directorship simply and solelybecause they are Members of Parliament and are, therefore, believedto be able to exercise unusual influence” (April 18, 1896). A sharpincrease in the MP-as-lobbyist pattern occurred after World War II(see Stewart 1958 and Beer 1956 for early studies). In 1950, theAttlee Commission (convened to investigate outside interests andlobbying in the House of Commons) concluded that commerciallobbyists were “few in number,” but by 1962, Finer notes a rising“army” of professional lobbyists and MPs under contract, notingthat “Parliament is not ‘above’ the battle between associations andcounter-associations; it is the cockpit” (Finer 1962, 43; also seeStewart 1958 and Harrison 1960 for evidence on sponsored MPsin the 1950s and 1960s). In 1961, Labour MP Frances Noel-Baker es-timated that the number of MPs employed by advertising and publicrelations firms had risen from 18 in 1958 to 27 in 1961 Noel-Baker(1961) and Hollingsworth (1991, 113) put this number at at least 50in 1965. The Business Background of MPs, periodically published byjournalist Andrew Roth beginning in 1957, confirms that the dispro-portionate involvement of Conservatives in consulting, directorships,and public relations was consistent throughout the careers of theMPs in our sample (Roth 1957). Similarly, Muller (1977) shows thatbetween 1945 and 1975 more than 30% of all Labour candidates andmore than 40% of all Labour MPs were directly sponsored by theunions.

WEALTH OF CANDIDATES TOHOUSE OF COMMONS

Data and Estimation Sample

Our research design assesses the financial benefits ofpolitical office by comparing the wealth of MPs withthat of unsuccessful candidates. In this section, wedescribe the process by which we collected wealthdata, along with relevant covariates, for a sample ofwinning and losing candidates to the British House ofCommons.

As a measure of wealth, we focus on politicians’probate values, a legal record of the size of an indi-vidual’s estate at the time of death.10 Probate valueshave been used to analyze the relationship betweeneconomic interests and voting in nineteenth-centuryParliament (Aydelotte 1967) and are widely used instudies of economic mobility by economic historians11;even today, probate values provide the basis for officialstatistics on the distribution of wealth.12 More than90% of UK citizens leave a probate record (the excep-tions being mostly indigent people), and the probatevalues for residents of England and Wales since 1858are available in a single archive in London that allowsone to collect the probate value for a person with aknown name and date of death.

Because the biographies of MPs are typically listedin encyclopedias and official publications, the namesand dates of death of successful candidates are easy toacquire. The primary difficulty is in finding the date ofdeath of losing candidates, who for the most part leavea scant historical trace. Fortunately, starting in the late19th century, The Times of London published brief bi-ographies of every parliamentary candidate (winningand losing) standing for the House of Commons ineach election. Because the candidate biographies arepublished at the time of the election, they do not, ofcourse, provide the date of death. Still, the detailsprovided by the biographies—–in particular, the fullcandidate name, along with the year and sometimesmonth of birth—–are sufficient to locate many candi-dates in public death record archives. We used an online

10 In the UK, a probate is needed in order for a deceased person’srepresentative to administer the assets of the estate. A probate isnormally filed for all estates containing real property and/or a singleclass of asset worth 5,000 GBP or more. By law, the estate includesthe value of all assets and monies at the time of death, after debts andexpenses have been deducted, plus any gifts exceeding 3,000 GBPthat have been made within the previous seven years and the valueof any trust from which the deceased has received an income. Jointlyheld property is also exempt, with certain restrictions. At the time ofwriting, a 40% inheritance tax is applied to the estate, with the first300,000 GBP exempt. Tax avoidance may affect the reported wealth,but this effect is mitigated by the fact that gifts given within sevenyears of death are taxable.11 See Owens et al. (2006) for an application, discussion, and manycitations.12 In a recent review comparing methods of estimating the wealthdistribution, HM Revenue and Customs (HMRC) concluded thatthe approach based on probate values remains “the best availablemeans,” surpassing alternate approaches based on investment in-come and direct household surveys (2007, 3).

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genealogy database13 that indexed all death recordsfiled since 1984 by year and month of birth, which madeit quite straightforward to find the date of death for acandidate using the information provided in The Timesbiographies.14 An additional benefit of The Times bi-ographies is that they include information on the edu-cation, occupation, and sometimes family backgroundof the candidates, characteristics that are likely to becorrelated with the candidates’ ability and wealth atthe time they ran for office.

We therefore digitized The Times Guide to the Houseof Commons for each of the seven general elections be-tween 1950 and 1970,15 and extracted key biographicaland electoral information for every candidate (some5,729 individuals). For each candidate, we record thefull name, date of birth (year and, if available, month),education (both secondary and university), and occu-pation, as well as an indicator for whether he or shehas a title of nobility. We then used the genealogydatabase to search for the date of death of 2,904 rel-atively competitive candidates, which at this stage wedefine as candidates who, not having previously won anelection, either won or lost by less than 10,000 votes ina general election between 1950 and 1970. This restric-tion was intended to exclude incumbents, unbeatablecandidates, and noncontenders for whom the implicitcounterfactual is not welldefined.

We found near-certain matches for 665 candidates;we were unable to find a record in cases where thecandidate had not yet died, died before 1984 (the startof the death record database), or produced so manymatching death records (because of a common name)that we were not able to identify the correct one withsufficient certainty. To ensure the comparability of ourwinning and losing samples, we ignored public informa-tion about winners’ death dates and searched for thedate of death in the same way for both MPs and losingcandidates. This results in some known Type I and TypeII errors in the sample of winners, but reduces the pos-sibility that an observed difference in wealth betweenthe two groups could be due to measurement error.16

13 www.thegenealogist.co.uk.14 Death records before 1984 are also available from this and otherarchives, but only as image files and not indexed by date of birth. Thismakes it much more time consuming to find earlier deaths, which ledus to restrict our search to deaths since 1984.15 We chose the time period to maximize the number of candidatesfor whom we could find probate values. The Times Guide to the Houseof Commons did not provide candidates’ years of birth before its 1950edition, which sets the lower bound on our search range. We stoppedcollecting data after the 1970 election because candidates by thenwere young enough that a relatively small proportion would havedied by now.16 To develop a protocol for finding death records given names anddates of birth, we created a sample of public figures (scientists, au-thors, athletes, etc.) whose death dates are publicly available fromthe Oxford Dictionary of National Biography and other sources,and whose years of birth match the distribution in our sample ofparliamentary candidates. We then searched the genealogy databasefor the death dates of these figures using only the last name andyear/month of birth. For most names, this search retrieves severalpossible matches, even in cases where the individual is not yet dead ordied before the database’s start year. We employed the random for-est algorithm (Breiman 2001) to optimally identify correct matches

With the 665 death records we obtained, we werethen able to find probate values for 561 candidatesin the probate calendar stored at First Avenue HouseinLondon.17 We then exclude from our estimation sam-ple 67 candidates who were from not from the two ma-jor parties (36 Liberals and 31 from regional parties)and a further 67 candidates who were found to haveserved before 1950, which leaves us with 427 candidatesoverall. Of these, 165 candidates are “competitive win-ners” in the sense that they entered Parliament in a racethey won by less than 10,000 votes; the remaining 262candidates are “competitive losers” in the sense that atsome point they came within 10,000 votes of winning.18

As an indication that the process of collecting probatesdid not depend on candidate characteristics in a waythat might bias our results, we find that, conditional onfinding the year of death for the candidate, the proba-bility of finding a probate value is the same for winnersand losers.19 The candidates in our estimation sampleare drawn from a fairly representative cross-section ofBritain. A total of 383 of 658 possible constituenciesare represented, with an average of 42 candidates fromeach of England’s nine geographic regions and 16 and19 from Wales and Scotland, respectively. (The deathregistry does not provide data for Northern Ireland,so we have no candidates from that region.) WithinEngland, the ratio of candidates in our estimation sam-ple to constituencies in the region is fairly consistentacross regions, with somewhat lower representation ofthe relatively uncompetitive South. (The least heavilyrepresented region, South West England, provided 47observations and has 110 constituencies, whereas themost heavily represented region, North West England,provided 75 observations and has 76 constituencies.)The candidates’ political debuts are also fairly evenlyspread across our period, with about 60 candidates

using information about closeness of the name match and raw namefrequency. Cross-validation indicated that we could achieve a TypeI error rate of around 5%. Once we obtained death dates for oursample of parliamentary candidates using this algorithm, we checkedour collected death dates against the true death dates for success-ful candidates (which are easily available from public records) andconfirmed that we indeed had an error rate of 5.2%.17 The few missing probates were mostly due to common names.Probates are listed under the quarter in which they are registered,which might be as much as a year after the date when the death wasregistered, and entries in the probate calendar do not list birth dates(unlike death records). As a result, there might be several possibleprobate records listed in the year or so following the death of acandidate with a common name, making it impossible to tell whichone is the correct estate. These cases were left missing.18 We also discarded the very few “losing” candidates who eventuallywon a seat after 1970. Including them as winners or losers does notchange the results (available on request).19 As might be expected, there is a slightly higher (by about .08)probability of finding a candidate’s year of death for winners thanfor losers. This is entirely driven by the fact that The Times Guide tothe House of Commons tends to provide a bit more information onwinners, such as full first name and month of birth, which makes iteasier for us to identify a matching death record for them. We find itunlikely that there is a correlation between a candidate’s wealth andwhether his or her month of birth appears in the Guide, conditionalon being a winner or loser. If anything, such information may bemore likely to appear for famous losers, which would presumablybias our results downward.

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TABLE 1. Gross Wealth at Death (Real 2007 GBP) for Competitive Candidates Who Ran forHouse of Commons Between 1950 and 1970 (Estimation Sample)

Mean Min. 1st Qtr. Median 3rd Qtr. Max. Obs.Both Parties

All candidates 599,385 4,597 186,311 257,948 487,857 12,133,626 427Winning candidates 828,379 12,111 236,118 315,089 722,944 12,133,626 165Losing candidates 455,172 4,597 179,200 249,808 329,103 8,338,986 262

Conservative PartyAll candidates 836,934 4,597 192,387 301,386 743,342 12,133,626 223Winning candidates 1,126,307 34,861 252,825 483,448 1,150,453 12,133,626 104Losing candidates 584,037 4,597 179,259 250,699 485,832 8,338,986 119

Labour PartyAll candidates 339,712 12,111 179,288 250,329 298,817 7,926,246 204Winning candidates 320,437 12,111 193,421 254,763 340,313 1,036,062 61Losing candidates 347,934 40,604 177,203 243,526 295,953 7,926,246 143

making their debut in each of the seven elections be-tween 1950 and 1970. As far as we know, our databaseis unique in the richness of the background informa-tion and electoral results it provides about both win-ning and losing candidates over several elections. WithQuerubin and Snyder (2008), we are also among thefirst to collect direct measures of politicians’ wealth.

Wealth Distributions

Table 1 provides descriptive statistics on the distribu-tion of wealth at the time of death for candidates inour sample. To make the comparison meaningful, weconverted the gross value of the estate into real 2007GBP using the Consumer Price Index from the Of-fice for National Statistics. We find that gross wealthat death varies widely across candidates ranging from4,597 GBP for the poorest candidate (ConservativeRobert Youngson) to 12,133,626 GBP for the rich-est candidate (Conservative Jacob Astor). The medianwealth at death is 257,948 GBP. As a benchmark, themedian gross value of the estate for males ages 65 andolder in 2002 was 113,477 GBP,20 indicating that themedian candidate died with almost twice the wealth ofthe median senior citizen in recent years. This resultis roughly consistent with Gagliarducci, Nannicini, andNaticchioni (2008), who find that the income reportedby Italian politicians before taking office exceeds themedian income in the rest of the Italian population byabout 45%.

Given the well-known differences in social class be-tween politicians from the two parties in this period,it should not be surprising that Conservative candi-dates died significantly richer than their Labour coun-terparts. As shown in Table 1, the median wealthamong Conservatives exceeded that among Labouritesby 50,000 GBP. Table 1 also provides the first indi-cation that Conservative MPs died much wealthier

20 Median wealth is computed from HM Revenue and Customs(HMRC; 2007) Statistics Table 13.2: “Estimated wealth of individ-uals in the U.K., 2002 (year of death basis),” which uses the estatemultiplier method to estimate wealth from probate values.

than unsuccessful Conservative candidates; the medianConservative MP died with 483, 448 GBP, whereas hisor her unsuccessful counterpart passed away with a“mere” 250, 699 GBP. The difference on the Labourside is less than 10, 200 GBP. Figure 2 provides anotherlook at this comparison by depicting the estimateddensity of log wealth for successful and unsuccessfulcandidates from each party. The first three wealth dis-tributions (for winning and losing Labour candidatesand losing Conservatives) look quite similar, but thewealth distribution for Conservative MPs appears tobe shifted quite markedly upward. Clearly, this differ-ence must reflect either a substantial effect of officeon wealth for Conservatives or a strong electoral biastoward wealthier candidates among Conservatives (orboth).

ESTIMATING THE EFFECT OF OFFICEON WEALTH

Because political office is not randomly assignedamong candidates, MPs and losing candidates may dif-fer in ways that are correlated with both wealth and theprobability of gaining office.21 As noted in the previ-ous section, our first line of defense against these con-founding factors is to restrict our sample to relatively

21 The most obvious reason why winners and losers might system-atically differ is that voters choose winners in a democracy, andvoters might have preferences over candidate characteristics thatare correlated with wealth. A more subtle, but probably more pow-erful, reason is that higher-quality candidates are likely to run inmore favorable districts. Because the opportunity cost of runningfor office is presumably higher for wealthier and abler individuals,higher-quality candidates are likely to run in districts where the prob-ability of winning is higher. If that is the case, winning candidatesmight die richer than losing ones even if voters ignore candidatecharacteristics and office has no effect on wealth. This more subtleselection effect may have been present in Britain in the period weexamine because, with no residency requirement for being staged in aparticular constituency, would-be candidates sometimes auditionedin multiple constituencies in a quest for the safest districts (Rush1969). However, given our focus on close races this is presumablymuch less of a concern. In fact, we show that in our sample there isnot a strong correlation between the vote share margin and wealthat death among either winners or losers.

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FIGURE 2. Distributions of (Log) Wealth at Death by Party for Winning and Losing Candidates toHouse of Commons 1950–1970

Note: Box percentile plots. Box shows empirical distribution function from .05 to .95 quantile; vertical lines indicate the .25, .5, and .75quantile, respectively. Observations outside the .05–.95 quantile range are marked by vertical whiskers. The dot indicates the mean.

TABLE 2. Characteristics of Competitive Candidates Who Ran for House of Commons Between1950 and 1970 (Estimation Sample)

Mean SD Min. Max. Mean SD Min. Max.Teacher 0.11 0.32 0 1 Female 0.05 0.21 0 1Barrister 0.10 0.30 0 1 Year of birth 1919 9.68 1890 1945Solicitor 0.07 0.25 0 1 Year of death 1995 6.40 1984 2005Doctor 0.02 0.15 0 1 Schooling: Eton 0.06 0.24 0 1Civil servant 0.01 0.11 0 1 Schooling: public 0.30 0.46 0 1Local politician 0.25 0.43 0 1 Schooling: regular 0.39 0.49 0 1Business 0.14 0.35 0 1 Schooling: not reported 0.25 0.43 0 1White collar 0.10 0.30 0 1 University: Oxbridge 0.28 0.45 0 1Union official 0.02 0.15 0 1 University: degree 0.36 0.48 0 1Journalist 0.10 0.30 0 1 University: not reported 0.36 0.48 0 1Miner 0.01 0.08 0 1 Title of nobility 0.03 0.17 0 1Note: All covariates except year of death are measured at the time of the candidates’ first race between 1950 and 1970.

competitive candidates. In this section, we describestatistical approaches we use to address remainingconfounders.

Matching Estimates

Our data set includes an unusually rich set of covariatesfor each candidate, which makes it possible to condi-tion on many possible differences between winners andlosers. In particular, for every candidate we record theyear of birth, gender, party, schooling, university educa-

tion, detailed occupation, titles of nobility,22 and year ofdeath. Descriptive statistics for the covariates are pre-sented in Table 2. All characteristics except the year ofdeath and wealth are measured from The Times Guideto the House of Commons biography that appearsfor the first constituency race of each candidate. Thecovariates are therefore “pretreatment” in the sense

22 We indicate that the candidate has a title of nobility if “Sir,” “Vis-count,” “Lady,” or “Lord” precedes the name in The Times bio-graphy.

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that they are not affected by whether the candidatewon office.23

To clarify the assumptions for the estimation, let Wibe a binary treatment indicator coded one if candidatei served at least one period in the House of Commons,and zero if candidate i never attained office. X is an(n ! k) matrix that includes our k observed covariatesfor all n candidates with row Xi referring to the char-acteristics of candidate i. The variables Yi(0) and Yi(1)represent the wealth that candidate i would realize withand without gaining political office (i.e., “potential out-comes”). Evidently, only one of the potential outcomesis observed for each candidate. In the following, weproceed by assuming unconfoundedness given the ob-served covariates (i.e., (Y1, Y0) " W|X), and commonsupport (i.e., 0 < Pr(W = 1|X) < 1) holds with proba-bility one for (almost) every value of X (Rosenbaumand Rubin 1983).

The validity of the unconfoundedness assumptiondepends on the quality of the covariates in captur-ing the assignment mechanism (i.e., the process bywhich candidates are sorted into winners or losers). Ar-guably, our unusually rich set of covariates captures themost obvious confounders. To the extent that wealthiercandidates were better able to attain office (perhapsby using their connections to be placed in more fa-vorable districts), the omission of wealth at the timeof candidacy may be particularly problematic. How-ever, although we do not measure preexisting wealthexplicitly (no such data are available), many of ourcovariates—–such as whether a candidate was schooledat Eton, studied at Oxbridge, worked as a barrister, orhas a title of nobility—–must be highly correlated withpreexisting wealth and, therefore, indirectly control forthis omitted factor. Later in the article, we employa different estimation strategy based on a regressiondiscontinuity design that relies on close elections tocontrol for unobservable factors.

We chose matching as our main method of covariateadjustment in order to avoid parametric assumptionsand to keep the analysis transparent (Imbens 2004;Rubin 2006). Specifically, we employ genetic matching(with replacement and one-to-one matching) followingDiamond and Sekhon (2008).

Matching Results for the Conservative Party. Theupper panel of Figure 3 presents measures of covariatebalance between Conservative winners and losers be-fore and after our matching procedure. For each covari-ate, we plot the standardized bias as measured by thedifference in means between the winners and the losersscaled by the pooled standard deviation. Accordingly,

23 One question is whether we should condition on the year of deathor not given that it is measured posttreatment and may be affected bywealth and political office. We report estimates including the year ofdeath, but excluding it does not change the results (available on re-quest). The direction of the bias introduced by including or excludingyear of death as a covariate is somewhat ambiguous. Candidates wholived longer may have had more time to make money, but they mayhave also drawn down their savings further; winning office, however,may lead to longer life, or it may bring stress and an earlier demise.In separate tests, we find no systematic effect of gaining office onlongevity, which suggests that posttreatment bias is not a concern.

circles to the right (left) of the dashed vertical line atzero indicate a higher incidence of a certain charac-teristic in the group of winning (losing) candidates. Asexpected, there are clear differences (indicated by un-filled circles) in the distribution of preexisting charac-teristics between Conservative winners and losers be-fore matching. MPs were more likely than unsuccessfulcandidates to have aristocratic backgrounds and eliteeducations. Winning candidates were less likely to bein white-collar professions (engineering, accounting, orpublic relations), journalism, and teaching professions,and also less likely to have business backgrounds. Aftermatching, however, we achieve a very high degree ofcovariate balance, indicated by the filled circles. Thestandardized bias is now within 0.1 for all variables. Thelowest p value across paired t tests and KS tests is .16,which indicates that the corresponding distributions forthe matched groups are similar across all covariates.The matched groups of winners and losers have verysimilar observed characteristics, such that any remain-ing difference between the wealth of winning and losingcandidates can plausibly be attributed to the effect oftreatment rather than preexisting differences.24

The upper panel in Table 3 displays our effect es-timates. The first column presents the results from asimple OLS regression (with robust standard errors)of wealth on the treatment indicator, including all co-variates. Columns two and three display the resultsfrom the matching estimator for two quantities of in-terest: the average treatment effect (ATE) given by!ATE = E[(Yi(1) # Yi(0)], and the average treatment ef-fect for the treated (ATT) given by !ATT = E[(Yi(1) #Yi(0)|Wi = 1] with Abadie and Imbens (2006) standarderrors. Across specifications, we find a robust and sub-stantial impact of serving on wealth at the time ofdeath. We estimate that serving in Parliament increasedwealth at death by between 71% and 155%, dependingon the specification. For all specifications, we soundlyreject the null hypothesis of no effect at conventionallevels.

Matching Results for Labour Party. Balance resultsfor Labour candidates are reported in the lower panelof Figure 3. Again, we find some pronounced differ-ences in the covariate distributions between MPs andunsuccessful candidates before matching. The discrep-ancies between winners and losers are roughly the re-verse of those for the Conservative Party: among thewinning Labourites, there is a smaller fraction of can-didates with an Oxbridge education, Eton schooling,or business background than among the unsuccessfulcandidates, but a higher fraction of union officials andlocal politicians. After matching, these differences arealmost completely removed. We obtain a very highdegree of balance on all covariates, with the lowestp value across all balance tests being .30.

The lower panel in Table 3 presents the matching-based effect estimates for Labour candidates.

24 Notice that there are no union officials or miners among theConservative candidates, so these two variables are balanced in theunmatched data already.

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FIGURE 3. Covariate Balance Before and After Matching

Note: For each covariate the figure displays the standardized bias before matching (open circles) and after matching (closed circles).Standardized bias is computed as 100 times the mean difference between treatment and control units divided by the pooled standarddeviation.

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TABLE 3. Matching Estimates: Effect of Serving in House of Commons on (Log)Wealth at Death

Conservative Party Labour Party

OLS Matching Matching OLS Matching MatchingATE ATE ATT ATE ATE ATT

Effect of serving 0.54 0.86 0.95 0.16 0.14 0.13Standard error 0.20 0.26 0.34 0.12 0.18 0.15Covariates ! ! ! ! ! !

Percent wealth increase 71 136 155 17 15 1395% Lower bound 15 41 31 #6 #19 #1595% Upper bound 153 293 398 48 63 52Notes: N = 223 for the Conservative Party, N = 204 for the Labour Party; for the ATT estimation, there are 104 treatedunits for the Conservative Party and 61 for Labour. Covariates include all covariates listed in Table 2. ATT = averagetreatment effect for the Treated, ATE = average treatment effect, OLS = ordinary least squares. Matching resultsare from 1 : 1 Genetic Matching with postmatching regression adjustment. Standard errors are robust for the OLSestimation and Abadie-Imbens for matching.

Consistent with the distributional box plots shownpreviously, we find no effect of serving on wealth atdeath. The point estimates across all models are closeto zero. Although this null finding is not very preciselyestimated, the difference between the effect for Con-servative and Labour MPs is clear: in an OLS regres-sion pooling the two parties, the p value on the testthat the coefficient is the same for the two parties is.05.

Regression Discontinuity Design Results

The matching results presented so far rest on the as-sumption of unconfoundedness, which fails if, con-ditional on the observed covariates, there remainimbalances in important unobserved factors betweenwinners and losers. Controlling for unobserved con-founding is impossible in most observational studies,but the unique nature of political contests provides anopportunity to apply a regression discontinuity (RD)design to the problem (Thistlethwaite and Campbell1960). Following pioneering work by Lee (2008), wenote that in very close elections, the assignment topolitical office is largely based on random factors. Al-though winning candidates may generally be differentfrom losing candidates at the time of the election (e.g.,better looks, more money, greater speaking ability),there is no reason to expect the winners and losersof elections decided by razor-thin margins to system-atically differ in any way. The RD design thereforeattempts to estimate the difference in wealth preciselyat the threshold where winners and losers are decided(i.e., where the margin of victory approaches zero). Iflocal random assignment holds at the threshold, theRD estimate can thus be as credible as an estimatefrom a randomized experiment.

In particular, let Zi be the vote margin for candidatei. For winning candidates, Zi is computed from theirfirst successful race as the difference between theirown vote share and that of the runner-up. For losingcandidates, Zi is computed from their best race as the

difference between their vote share and that of thewinner.25

Given this definition, gaining office is a deterministicfunction of the margin Wi = 1{Zi $ 0}. In other words,all candidates with Zi > 0 are assigned to the group ofwinners and enter Parliament, whereas candidates whoscore just below the threshold are assigned to the groupof losing candidates and do not enter Parliament. Theaverage treatment effect at the threshold Z = 0 is thendefined as

!RDD = limz%0E[Yi|Zi = z] # limz&0E[Yi|Zi = z]

= E[Yi(1) # Yi(0)|Zi = 0], (1)

which is identified under the assumption thatE[Y(0)|Z = z] and E[Y(1)|Z = z] are continuous in z.26

This assumption is fairly weak and will fail only if can-didates can strategically sort around the threshold. Infact, Lee (2008) shows that as long as the vote share

25 The application of a regression discontinuity design to a candidate-level outcome such as wealth requires addressing the fact thatmany candidates stand for election more than once, and thus loserssometimes reappear as winners in later elections. Our approachobviates the resulting compliance problems (Angrist, Imbens, andRubin 1996) by defining the assignment variable in the context ofa candidate’s entire electoral history: the best race for losers andthe first successful race for winners. This definition implies that closewinners will be compared to the most competitive losers available.As our balance tests later show, close winners and losers definedin this way do not differ in any observed covariate, including thenumber of previous races the candidate has run. We have conductedadditional tests using a fuzzy regression discontinuity design, whichuses success in a candidate’s first race as an instrument for servingin Parliament. The point estimates are similar but very imprecisegiven our limited sample size and the efficiency loss incurred. Thefuzzy design is particularly inefficient in the setting of UK electionsbecause new candidates are often staged in unwinnable districts inorder to gain experience, which means that the first race providesonly a very noisy signal of candidate quality.26 Notice that compared to the matching estimates shown previ-ously, unconfoundedness holds trivially here because W does notvary conditional on Z, but the overlap assumption is violated be-cause the probability of assignment is either Pr(Wi = 1|Zi > 0) = 1or Pr(Wi = 1|Zi < 0) = 0, depending on whether a candidate scoresbelow or above the threshold.

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includes some random component with a continuousdensity, treatment status is randomized at the thresholdof winning.27

The upper panel in Figure 4 presents the graphicalresults from the RD design for Conservative candi-dates. Wealth is plotted against the vote share margindefined previously (Zi). The dotted vertical line at zeroindicates the threshold separating MPs (to the rightof the threshold) and unsuccessful candidates (to theleft of the threshold). The solid lines represent theexpected wealth conditional on the vote share mar-gin, approximated using a locally weighted polynomialregression fitted separately to both sides of the thresh-old; pointwise .95 confidence bounds are indicated bydashed lines. Recall that the effect of office on wealthin the RD design is defined as the difference of thetwo conditional expectation functions at the threshold.By (minimally) extrapolating the polynomial fit to thethreshold, we estimate that marginal winning candi-dates died with about 546,000 GBP compared to about298,000 GBP for losing candidates. The first column inTable 4 displays the formal estimate of this jump in theconditional expectation function at the discontinuity,which is about 250,000 GBP or about an 83% increasein wealth at death. The (nonparametric) bootstrapped95% confidence interval ranges from 8% to 212%. Thisestimate is similar to the matching results obtainedpreviously and suggests that narrowly successful Con-servative candidates almost doubled their wealth bywinning office.

Another notable feature in the upper panel of Fig-ure 4 is that the conditional expectation of wealth isremarkably flat over the support of the vote sharemargin shown (other than at the threshold separatinglosers and winners). This makes us more confident thatour estimates indeed reflect the effect of winning officeon wealth rather than the effect of candidate charac-teristics on wealth. If having a wealthy backgroundprovided a strong boost to one’s political career (e.g.,by making it easier to get selected for safer seats), wemight expect to find that more successful politicians(in terms of vote share won) died wealthier than lesssuccessful politicians, regardless of whether they at-tained office. Instead, we find that close losers and not-so-close losers died with similar wealth, as did closewinners and those who won handily. The key differencethen is between winners and losers in the ConservativeParty.28

27 As is well known, the RD design is likely to have a very highdegree of internal validity, but we pay a price in terms of decreasedexternal validity and also efficiency. !RDD is a local average treat-ment effect informative only for marginal candidates close to thethreshold of winning (unless additional homogeneity assumptionsare introduced). This is desirable in our context, however, becausethe counterfactual is more reasonable for marginal compared to“unbeatable” candidates. Moreover, given that candidates in closerraces attract more public scrutiny and face a higher risk of electoraldefeat, rent seeking may be limited compared to candidates in safedistricts (Barro 1973; Besley and Burgess 2002; Besley and Case1995). Presumably, our estimates of the returns to office thereforeprovide a conservative lower bound for the average across all MPs.28 The relative inelasticity of wealth with respect to vote share (again,other than at the threshold) likely explains why our estimated effect

TABLE 4. Regression Discontinuity DesignResults: Effect of Serving in House ofCommons on (Log) Wealth at Death

Conservative LabourParty Party

Effect of serving 0.61 0.66 #0.20 #0.25Standard error (0.27) (0.37) (0.26) (.26)Covariates x x

Percent wealth increase 83 94 #18 #2395% Lower bound 8 #7 #52 #6595% Upper bound 212 306 31 71Note: Effect estimates at the threshold of winning !RDD =E[Y(1) # Y(0) | Z = 0]. Estimates without covariates from localpolynomial regression fit to both sides of the threshold withbootstrapped standard errors. Estimates with covariates fromlocal linear regression with rectangular kernel (equation 2);bandwidth is 15 percentage point of vote share margin withrobust standard errors. For the Conservative Party, N = 223for the estimates without covariates, and N = 165 with covari-ates. For the Labour Party, N = 204 for the estimates withoutcovariates, and N = 164 with covariates.

The lower panel in Figure 4 displays similar graph-ical results for the Labour candidates. Again, the RDfindings correspond very closely with the matching re-sults. There is almost no discontinuity at the thresh-old, suggesting that there is no effect of winning of-fice on wealth among Labourites. The third columnin Table 4 displays the estimate of the jump in theconditional expectation function at the discontinuity,which is about 56,000 GBP or about an 18% decreasein wealth at death. The bootstrapped 95% confidenceinterval ranges from #52% to 32%.

As expected, the results from the graphical analy-sis do not change when we introduce covariates intothe estimation. To formally estimate the difference be-tween the two regression functions at the discontinuitypoint while including our full set of covariates, we fol-low the proposal by Imbens and Lemieux (2007) andfit a local linear regression of the form29

min",#,!,$,%

N!

i=1

1{#h ' Zi ' h}

· (Yi # " # # · Zi # ! · Wi # $ · Zi · Wi # %(Xi)2, (2)

where ! identifies our treatment effect estimate. Thevariance of ! can simply be estimated using the stan-dard robust variance from the OLS regression. Thebandwidth around the threshold of winning, h, is

is about the same using RD as it is with matching: if wealth and voteshare were highly correlated away from the threshold, a matchingdesign would be upwardly biased because it could not control forvote share—–a covariate on which there is, by definition, no overlapbetween the treatment and control groups and thus no matchingunits.29 See Imbens and Lemieux (2007) for a discussion of alternativeestimation strategies. They key issue is that the RD estimand is asingle boundary point, so that nonparametric kernel regression maycontain a high order bias due to slow convergence. Local linearregression provides a practical solution to this problem.

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FIGURE 4. Regression Discontinuity Design: Effect of Serving in House of Commons on Wealth atDeath

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TABLE 5. Testing for Jumps at Nondiscontinuity Points: Estimates forConservative Candidates

Vote share threshold #0.10 #0.05 0 0.05 0.10Estimate #0.53 #0.43 0.66 0.33 0.63Standard error 0.53 0.54 0.37 0.50 0.8195% Lower bound #1.59 #1.50 #0.07 #0.66 #0.9795% Upper bound 0.52 0.64 1.4 1.33 2.24Note: The discontinuity in wealth is estimated at vote share thresholds from #.1 to .1, including 0, thetrue threshold (for which results are shown in bold). Regressions include covariates.

chosen by the Imbens and Lemieux (two-sided) cross-validation criterion.30 The optimal bandwidth accord-ing to this criterion is a vote share of about 15 percent-age points.31 The second and fourth columns in Table 4present results for this regression with our full set ofcovariates (including schooling, university education,occupation, gender, year of birth, and year of death).Just as in a randomized experiment, the inclusion ofcovariates has only a small effect on the estimate of !because, in the close neighborhood of the threshold,all observed and unobserved covariates should be in-dependent of the treatment. We again reject the null atthe conventional levels, but the standard errors, as ex-pected, are slightly larger than in the matching analysisbecause the RD approach focuses on the neighborhoodof the threshold, where there are fewer observations.

Robustness Tests for RD Estimation

Test for Wealth Jumps at Nondiscontinuity Points.Following the proposal by Imbens and Lemieux (2007),we test for jumps in wealth at points other than thethreshold at which office was assigned. We produce RDestimates at 5 percentage point increments along therange of the vote share variable, in each case limitinganalysis to either the winning or losing candidates.32

Table 5 compares these placebo effect estimates withour estimate of the effect of winning office on wealth.(We focus on Conservative candidates because we didnot find an effect for Labour.) The true vote sharethreshold where winners and losers are decided is zero;the estimated jump at this threshold is reproduced herein bold along with the estimated discontinuities at fourplacebo thresholds (#.1, #.05, .05, and .1). As shouldbe expected, the true effect stands out in magnitudeand statistical significance from the placebo effects; for

30 Imbens and Lemieux (2007, equation 5.12).31 As suggested by the flatness of the conditional expectation, ourresults are somewhat insensitive to the choice of bandwidth for therectangular kernel, although obviously the standard errors tend toincrease as the bandwidth is decreased and fewer observations areused. For example, for the Conservatives, the estimated treatmenteffect (including all covariates) is .82 (.59) when we use half theoptimal threshold (i.e., 7.5 percentage points) and .57 (.29) whendouble the optimal bandwidth (i.e., 30 percentage points) is used.For completeness, the same estimates without all covariates are .71(.45) for half and .63 (.27) for double the bandwidth.32 By focusing on each subsample separately, we follow Imbens andLemieux (2007, 27), who note that otherwise our regression functionwould assume continuity at a point where we know there is a break.

none of the placebo effects is the point estimate largerthan the standard error. This finding increases our con-fidence that our estimate measures the effect of gainingoffice rather than a random artifact of the data.

Test for Zero Average Effect on Placebo Outcomes.Here we assess whether winning office appears to haveaffected candidate characteristics (e.g., year of birth)that could not possibly have been affected by servingin Parliament. This type of test, which was first appliedin an RD setting by Lee, Morelli, and Butler (2004),33

looks for evidence that the winners of very close elec-tions do not appear to have been randomly selected;if they were, we would expect to see no treatment ef-fect on these placebo outcomes. We repeatedly obtainRD estimates of the effect of serving in Parliamenton these placebo outcomes and present the results forboth parties in Table 6. The 95% confidence intervalon the estimated placebo effect includes zero for allcovariates in both parties, with only one exception (anindicator for candidates whose secondary school is notreported in their bios). Given the number of covariatesbeing tested, we would expect some such difference byrandom chance, and after making any statistical cor-rection for multiple comparisons (e.g., Bonferroni), nosignificant differences are found. The degree of imbal-ance across groups is similar to what we would expectin a randomized experiment.

Included in Table 6 with the covariates we consid-ered previously are several additional measures that wejudged to provide a further useful indication of whetherwinners and losers of close elections may differ in someimportant way. One such measure is the number of at-tempts the candidate took before the decisive race (i.e.,the first winning race for winners or the best losing racefor losers), indicated by “Previous Attempts” in Table5. If the winners in our data set triumphed throughpersistence, we would expect this covariate to system-atically differ between the two groups. Another suchmeasure is the vote share for the candidate’s party inthe same district in the prior election (indicated by votemargin in previous race). Because candidates com-peted to be staged in favorable districts, this is likely tobe a good measure of the desirability of the seat andtherefore the quality of the candidate. In the next rowsin Table 6, we also checked whether the constituen-cies of winners and losers of close elections differ with

33 See Imbens and Lemieux (2007) for a discussion.

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TABLE 6. Effect of Serving on Placebo Outcomes

Conservative Party Labour Party

Placebo PlaceboPlacebo Outcome Effect 95. UB 95 LB Effect 95. UB 95 LBYear of birth 2.79 8.10 #2.62 2.50 8.62 #3.77Year of death 2.08 5.97 #1.89 2.23 6.23 #1.91Age at death 0.12 #6.32 6.56 1.41 #5.78 8.60Female #0.01 0.14 #0.16 #0.03 0.06 #0.12Teacher #0.09 0.06 #0.23 #0.23 0.01 #0.47Barrister 0.09 0.25 #0.09 #0.07 0.05 #0.18Solicitor #0.13 0.07 #0.33 0.03 0.15 #0.10Doctor #0.00 0.12 #0.13 0.03 0.14 #0.09Civil servant 0.04 0.10 #0.02 #0.03 0.03 #0.10Local politician #0.01 0.23 #0.25 0.10 0.40 #0.21Business #0.05 0.21 #0.31 0.00 0.13 #0.13White collar #0.00 0.19 #0.19 #0.00 0.15 #0.16Union official 0.00 NA NA #0.04 0.12 #0.20Journalist #0.08 0.07 #0.22 0.05 0.29 #0.20Miner 0.00 NA NA #0.02 0.02 #0.07Schooling: Eton 0.12 0.28 #0.04 #0.04 0.02 #0.11Schooling: public #0.22 0.07 #0.52 0.03 0.23 #0.17Schooling: regular #0.15 0.12 #0.42 #0.01 0.32 #0.35Schooling: not reported 0.25 0.46 0.03 0.02 0.33 #0.30University: Oxbridge 0.10 0.36 #0.17 #0.04 0.21 #0.30University: degree #0.02 0.25 #0.30 0.10 0.42 #0.23University: not reported #0.08 0.21 #0.37 #0.06 0.25 #0.37Aristocrat 0.05 0.19 #0.09 0.06 0.17 #0.06Previous races 0.22 0.59 #0.16 0.24 0.76 #0.29Vote margin in previous race #0.00 0.04 #0.05 #0.05 0.01 #0.11Size of electorate #622 #8056 6812 #545 #7488 6397Turnout #0.01 #0.04 0.03 0.02 #0.02 0.05Effective number of candidates 0.02 #0.12 0.17 #0.01 #0.24 0.23Region: East Midlands #0.01 #0.20 0.18 0.04 #0.19 0.28Region: East of England 0.00 #0.18 0.18 0.03 #0.20 0.25Region: Greater London 0.08 #0.11 0.27 #0.05 #0.25 0.16Region: North East England #0.07 #0.17 0.03 0.06 #0.07 0.19Region: North West England #0.17 #0.41 0.08 #0.08 #0.27 0.11Region: South East England 0.11 #0.04 0.27 0.11 #0.14 0.35Region: South West England 0.08 #0.11 0.27 #0.09 #0.27 0.10Region: West Midlands #0.12 #0.39 0.15 #0.12 #0.35 0.11Region: Yorkshire and Humberside 0.03 #0.11 0.16 0.11 #0.13 0.35Scotland 0.03 #0.09 0.15 #0.05 #0.19 0.09Wales 0.04 #0.06 0.15 0.04 #0.10 0.17Note: Every row shows a placebo treatment effect estimated at the threshold of winning !RDD = E [Y(1) # Y(0)|Z = 0] obtainedfrom local linear regression with rectangular kernel (equation 2); bandwidth is 15 percentage point of vote share margin. UBand LB refer to the upper and lower bounds of the 95% confidence interval.

respect to the size of the electorate, turnout, and ef-fective number of candidates. Finally, the last rows ofTable 5 consider a battery of dummy variables for eachof the nine regions of England, as well as Scotland andWales, to see whether the constituencies of winners andlosers of close elections differ geographically. The factthat we do not find any significant difference for any ofthese variables provides support for the validity of theidentification strategy.

DISCUSSION

Based on the analysis in the previous section, we con-clude that serving in the House of Commons roughly

doubled the wealth at death of Conservative candidateson average, but had no effect for candidates of theLabour Party. It remains to consider possible channelsby which serving Parliament could have such a strong,party-specific effect on personal wealth.

How Did MPs Make Money?

One possibility to address immediately is that MPs’official pay explains the financial benefit of office:perhaps Conservative MPs received a significantlyhigher salary than what they would have earned outsideParliament. This conjecture is completely at odds with

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the evidence, however. The MP salary in the period weexamine was modest compared to wages in professionsmost MPs commonly pursued before entering office. Asurvey conducted among new members of Parliamentin 1979 indicates that more than three fourths of en-tering MPs took a pay cut to serve in Parliament; at atime when an MP’s salary was 6,897 GBP in nominalterms, the median backbencher had left a job paying11,000 GBP (Judge 1984, 68). The New Earnings Sur-vey, which was first conducted in 1971, indicates thatover the past several decades, MPs have consistentlyearned somewhat more than journalists and universityprofessors, but less than legal professionals and man-agers in large companies. What’s more, Conservativeswere more likely to face a pay cut after being elected,given that they tended to come from more lucrative ca-reers in law and business. If salaries were the dominantfactor, we might expect to see the union officials, jour-nalists, and lecturers of the Labour Party profit, but notthe accountants, barristers, and managing directors ofthe Conservative Party. Given that we see the opposite,salary evidently does not explain the observed patternof benefits from office.

It is also unlikely that health effects can explain ourfindings. If the status boost of serving in Parliamentimproved health (see Redelmeier and Singh 2001, butalso Sylvestre, Huszti, and Hanley 2006), it may haveextended MPs’ working lives and increased the sizeof their estates. (However, living longer can depletesavings.) In fact, we find no difference in the longevityof MPs and unsuccessful candidates. For both parties,a treatment indicator for winning office is statisticallyinsignificant in regressions of either age at death or yearof death on our covariates. Moreover, in our balancetests for the regression discontinuity design, we foundthat there is no discontinuity in age of death or yearof death at the threshold of winning (Table 6). Finally,none of our results are affected by including the yearof death in the regressions.

The most obvious channel through which winningoffice may have increased wealth is through lucrative,politically linked outside employment (particularly di-rectorships and “parliamentary consultancies”) thathave periodically come under public scrutiny. To geta sense of the extent to which MPs were able to capi-talize on their office in acquiring this kind of employ-ment, we used the Directory of Directors, an annuallisting of the directors serving on boards of companiestraded on the London Stock Exchange, to count thenumber of directorships listed in 1983 for each of thecandidates for whom we also collected wealth data.We find that, controlling for our standard battery ofcovariates (gender; year of birth; year of death; and in-dicators for schooling, university, and titles of nobility),Conservative MPs indeed had significantly (p = .08)more directorships than unsuccessful candidates, withthe predicted number of directorships being .46 forwinners and .13 for losers at covariate means. AmongLabour MPs, we find that losers actually had moredirectorships than winners (.54 vs. .10), although thedifference was not significant (p = .47) and was drivenlargely by a single outlier among the losers who held

19 directorships. (With that outlier removed, the ex-pected rate is .09 for losers and .11 for winners [p =.80].)

It seems worth asking how much of the totalwealth gain we estimate for Conservative MPs couldbe accounted for solely by the politically linked di-rectorships that MPs collected. To answer this, weconduct the following back-of-the-envelope calcu-lations.

First, we need to determine by how much the addeddirectorships would be expected to increase the aver-age earnings of MPs compared to unsuccessful candi-dates. As noted previously, winning office was expectedto increase the average number of public companydirectorships among Conservatives from .13 to .46.These figures considerably understate the increase inall directorships, however, because they include onlydirectorships of public companies, whereas many MPsheld private company directorships. If we scale theincrease in 1983 directorships according to the totalnumber of directorships reported in the 1975 RMI, itworks out to an increase in roughly one directorshipper member. The average annual fee for outside di-rectors was about 25,000 GBP (in 2007 prices) plusbenefits (Hollingsworth 1991, 21, 157), indicating thatwinning office conferred roughly that amount in extradirectorship income on our sample of MPs, at least inthe 1970s and 1980s.

Second, we need to convert the gain in wealth atdeath that we estimated previously into a differencein annual earnings. As noted, we estimate the averagewealth benefit of serving in Parliament for our sam-ple at about 250,000 in 2007 GBP. Only a fraction ofearnings is ultimately bequeathed; using U.S. probatesfrom the 1960s and 1970s, Menchik and David (1983)estimate the marginal propensity to bequeath fromearnings at about .25 for the top quintile of his sample.If these data are an appropriate rough guide in ourcontext, MPs would have had to earn roughly 1 millionpounds more (at 2007 prices), on average, over thecourse of their lifetimes compared to unsuccessful can-didates in order to boost their estates by the estimatedamount. Because the median Conservative MP served18 years and lived 17 more, this would require earningaround 25,000 GBP more per year after being electedthan one would have earned outside politics. This isprecisely the boost in average annual directorship feesin 1983 that we estimated previously. Recognizing thatthis calculation is necessarily quite rough, it does seemthat directorships alone could account for a sizable pro-portion of Conservative MPs’ wealth gains from beingelected to Parliament.

Ample anecdotal evidence confirms that MPs’ direc-torships were not merely ways to make money on theside, but were rather integrally connected with MPs’political roles. What MPs provided for their clients asdirectors and parliamentary consultants was politicalinuence and information, either directly or throughconnections to ministers and members of the civil ser-vice. (As noted in Table 7, 13% of Conservative MPsserved as ministers at some point in their careers, and27% had front bench positions.) MPs and the outside

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TABLE 7. Characteristics of Political Careers of Members of Parliament(Estimation Sample)

Mean Min. 1st Qtr. Median 3rd Qtr. Max.Conservative

Cabinet 0.13 0 0 0 0 1Front bench 0.27 0 0 0 1 1Year of birth 1916 1895 1912 1916 1921 1940Age entered office 42 29 37 41 46 59Year entered office 1958 1950 1951 1959 1964 1970Year retired from last office 1977 1955 1966 1974 1987 2001Years as MP and former MP 37 14 31 38 45 55Years served as MP 18 2 9 18 24 51Years as former MP 18 0 10 17 28 41

LabourCabinet 0.13 0 0 0 0 1Front bench 0.30 0 0 0 1 1Year of birth 1920 1901 1915 1920 1926 1935Age entered office 42 31 38 42 46 57Year entered office 1962 1950 1959 1964 1966 1970Year retired from last office 1981 1951 1979 1983 1987 1997Years as MP and former MP 34 18 30 34 40 50Years served as MP 18 1 13 19 24 33Years as former MP 15 0 6 14 21 46

interests who retain them have at times been quite can-did about the nature of this political exchange. A monthafter leaving office as Chancellor of the Exchequer inthe wake of the 1964 general election (and while asitting MP), Reginald Maudling accepted a position asexecutive director of a merchant banking firm, with feesestimated at more than five times his MP salary. Jour-nalist Andrew Roth noted that “the firm made it clearto the financial writers present that it was very useful in-deed to have on tap the knowledge and contacts madeby a former Cabinet Minister who had been Chancellorof the Exchequer and President of the Board of Trade”(1965, xii). In 1968, Conservative MP Anthony Court-ney explained that “Election to the House of Commonsnot only consolidated but also improved my businessaffairs. I had acquired for the benefit of the firms withwhich I was connected improved personal contact withthe Board of Trade and other ministers” (1968, 63). Theexchange of cash for influence was perhaps most obvi-ous in the case of lobbying firms established and runby sitting MPs, of which Westminster CommunicationsLtd. (run by MPs Markus Fox and Keith Speed) wasamong the most successful. As documented in RMIsfrom the 1980s and 1990s, Westminster Communica-tions provided political lobbying to a long list of clients.Fox later defended the practice of running a lobbyingcompany while in Parliament by explaining that “Wethought if we, as Members of Parliament, were actuallycontrolling the company we could ensure we only actedfor those clients who we were convinced were of goodstanding.”34

A survey of MPs in the mid-1980s suggests that theblurring between legislator and lobbyist was not limited

34 Evidence to Select Committee on Members’ Interest, HC 44-vii,200–2. Also see Hollingsworth 1991, 21, 69, 70–4, 105–7, 120–2.

to a few isolated entrepreneurs. Only 20% of surveyedMPs identified a hypothetical situation as corrupt inwhich an MP “is retained by a major company toarrange meetings and dinners in the House at whichits executives can meet parliamentarians” (Mancuso1995, 35). One MP noted that “such sponsored dinnershappen all the time” (44), and another commented,“The rules allow it. We all advocate causes and arrangemeetings between MPs and external pressure groups”(118). Survey responses portrayed a situation in whichit was “very easy” for MPs to be hired as consultantsto outside firms (“you don’t have to be clever to geta retainer” [154]), and in which it was common forcompanies to contact Conservative Party leaders and“ask for the name of an MP willing to act as an adviser”(63). One surveyed MP raised an eyebrow at the effectoutside payments had on MPs’ positions: “There areso many members on retainers to P.R. companies whoare receiving payment for advancing specific causes,it would be interesting to see whether they would besupporting the same cause or side of an issue if theywere not receiving payment” (65–66).

In sum, the evidence suggests that being elected toParliament endowed politicians with valuable politi-cal connections and knowledge that, through director-ships and other employment, helped special intereststo access the levers of policy making. This is consis-tent with evidence from several other countries, sug-gesting that employing sitting or former politicians asboard directors, consultants, or executives is valuableto firms precisely because of the political connectionsand knowledge that politicians possess (Faccio 2006;Ferguson and Voth 2008; Fisman 2001; Goldman, Ro-choll, and So 2008; n.d.; Jayachandran 2006; Johnsonand Mitton 2003; Khwaja and Mian 2005; Roberts1990).

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Why Did the Benefits of OfficeDiffer by Party?

The question remains why Labour MPs did not appearto derive as large a financial benefit from office as didtheir Conservative counterparts. We consider three ex-planations.

One explanation to consider is that differences in theideology of the parties explain the greater propensityof Conservative MPs to take on lucrative outside workwhile in Parliament and to thereby profit from office.The Labour Party of the period we examine remainedclosely tied to the socialist principles on which the partywas founded, and many members had arrived at theirseats in Parliament after careers in the trades unions,a culture in which serving on a corporate board wouldlikely be seen as betrayal. Mancuso (1995) interviewedMPs in the mid-1980s about their attitudes towardlegislative ethics; she found that Labour MPs madeup a disproportionate share of the group she termed“Puritans”—–MPs who had the most stringent attitudesabout conflicts of interest and performing favors forconstituents. She suggests that Puritan attitudes canbe seen as “an extension of Labour’s preference foreconomic and social interventionism and egalitarian-ism,” whereas Conservative MPs’ relatively lax ethicalstance was consonant with the Thatcher government’sembrace of “the entrepreneurial values of self-interestand initiative” (63). As Mancuso (1995) recognizes,the causal relationship between MPs’ reported ethicalstances and their behavior is complicated: those MPswho held outside positions in her study reported farmore permissive attitudes toward potential conflict ofinterest, but it could have been the difference in of-fers of lucrative employment that shaped their views,rather than their views that shaped their employmentprofile. Still, it seems reasonable that part of the differ-ence between Labour and Conservative MPs’ financialgains could relate to ideological differences betweenthe parties.

A second explanation is that the constituents ofthe Labour and Conservative parties wanted differentkinds of political goods and that influence peddling wasa more productive strategy in the market for goodsdesired by Conservative constituents.35 The clients ofthe Conservatives were business firms seeking highlytargetable goods, such as sector-specific or even firm-specific tax loopholes and regulatory breaks. Some ofthese goods could presumably be acquired by hiring anMP who could lobby the front bench to alter legislationand regulation accordingly. The Labour Party’s clientswere mainly labor unions, which sought more broad-based, programmatic policies (e.g., public ownershipof industries, support for the public pension and healthsystems, education reform) that yielded few targetedbenefits to specific unions. If we assume that Conser-vative MPs had more power over targetable benefitsthan did Labour MPs (e.g., if Conservative cabinetswere more likely to award targeted benefits and Con-

35 We thank Gary Cox for bringing this point to our attention.

servative MPs had more clout with Conservative cabi-nets), then this distinction may explain part of the dif-ference in patterns of outside employment and wealthgain between the two parties’ MPs. Then again, busi-ness interests could in theory extract targeted benefitsfrom cabinets of either party; indeed, business PACsin the U.S. have been seen to adjust their PAC con-tributions to respond to a change in control in theU.S. Congress more than labor PACs, suggesting thatbusiness interests in that setting extract their targetedbenefits from whoever is in power (Cox and Magar1999; Rudolph 1999). The difference in the nature ofpolitical goods sought by the two parties may thereforeprovide some explanatory power, but does not seemsto be enough to explain why Conservative MPs profitedmore.

We emphasize instead the difference in the way themarket for MPs’ services was organized between thetwo parties, which in turn resulted from a differencein the organization of the two parties. The Labour andConservative parties in the period we examine wereorganized and financed quite differently from eachother, in ways that ultimately affected how MPs foreach party related to outside interests. In the LabourParty, a small number of very large unions provided thebulk of the financing and exercised a correspondingamount of direct influence over policy and politicalrepresentation. Between 1945 and the 1990s, unionsconsistently provided 80% to 90% of the funding ofthe Labour Party central office and around two thirdsof the party’s funding overall (including local organi-zations) (Harrison 1960; Pinto-Duschinsky 1981; 1990).Trade unions also directly provided a plurality of del-egates to national party conferences as well as to lo-cal constituency councils responsible for selecting par-liamentary candidates. In contrast, the ConservativeParty drew its funding from a larger number of smallerplayers, and political influence was correspondingly dif-fuse. Company contributions provided only 30% of theparty’s income overall, and those contributions camefrom several hundred different companies with fairlyweak coordination among themselves.36 The bulk ofConservative Party finance came from individual con-tributions, whether through party fundraisers held bylocal constituency organizations (which alone broughtin more money than did corporate contributions) orlarge and undisclosed individual contributions and be-quests (Fisher 1994; Pinto-Duschinsky 1981; 1990).

Because unions were intimately involved in theselection of Labour candidates and, in many cases,financed their election to Parliament, Labour MPstended to enter office with well-defined obligations tospecific unions. The means by which unions ensuredthe loyalty of MPs was clearest in the case of directsponsorships, an arrangement that was formalized inthe party’s 1933 “Hastings agreement.” Between 1945

36 As a comparison of the distribution of union and corporate dona-tions, in 1987 the political expenditures of the largest union (Trans-port and General Workers) to the Labour Party exceeded the com-bined political donations of 1,300 of Britain’s largest companies tothe Conservative Party (Pinto-Duschinsky 1989, 208).

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and 1975, sponsorships extended to more than 30% ofall Labour candidates and more than 40% of all LabourMPs (Harrison 1960; Muller 1977). Unions sponsoredparliamentary prospects as early as the candidate selec-tion stage; if a union’s sponsored member were selectedto stand for election (a process in which the unionsjointly played a large role), that union would providecampaign finance through the election (Rush 1969).Unions tended to sponsor and promote candidatesfrom their own ranks who were likely to remain loyalrepresentatives once in office and return to the unionbureaucracy after retirement from Parliament (Muller1977).37 Occasionally, a sponsored member deviatedfrom the position advocated by the sponsoring union,with the consequence that the MP lost the sponsor-ship and, often, subsequently the seat (Harrison 1960;Muller 1977, 153). It seems likely that any sponsoredmember who was selling political advice to a privatefirm would suffer an equal or more severe punishment.In contrast, the process of selecting Conservative can-didates was shared between the party’s national officeand local constituency committees, neither of whichgave a particularly privileged role to individual compa-nies or other outside groups (Rush 1969). Conservativecandidates thus generally entered office with loyaltiesto the party and local constituency committees, butwith no exclusive obligations to any particular outsideinterest.

We suggest that it was largely because the unionswere effective in controlling politicians through non-monetary means that Labour MPs captured a relativelysmall economic bonus from serving in Parliament.Conservative MPs operated in an open market for po-litical services. Because client firms were numerous andpoorly organized among themselves, they competedfor MP loyalty and paid substantial sums to secureit, largely through consulting and lobbying contractsand directorship positions. Conservative MPs may havebeen better situated to confer those benefits (giventhat Conservative cabinets were likely more sympa-thetic to their demands), but they also entered Parlia-ment without exclusive obligations to unions or otheroutside groups. On the Labour side, the labor unionssuppressed the market for MPs’ services by control-ling the party and, through the party, the politiciansthemselves. Whereas Conservative clients (businesses)bought policies by paying individual members, Labourclients (the unions) bought the party itself. In thatsense, the trade unions’ solution looks something likebackward vertical integration: instead of purchasingpolitical services on the open market, the unions cre-ated a subsidiary (the Labour Party and its MPs) tosupply political goods. (In fact, the early history of theLabour Party is basically consistent with this interpre-tation [Beer 1965].)

37 Most of the money that changed hands in a sponsorship wentfrom the union to the constituency committee, and not to the mem-ber him- or herself. In fact, according to surveys carried out in the1990s, many Labour MPs who received a stipend as part of theirsponsorship passed this sum along to the constituency committee aswell (Mancuso 1995, 66).

In sum, we surmise that it is largely because businessinterests were less organized than the unions, and hadless power in Conservative politics than did unions inLabour politics, that Conservative MPs profited morefrom office than did Labour MPs. It is likely that thevalue of office in a variety of contexts similarly dependson the extent to which constituents can use formalmeans of political control and are organized enoughto restrain competition for political influence.

CONCLUSION

Many studies have shown that private firms gain fromconnections to politicians, but little is known about howpoliticians benefit from firms and other groups seekingpolitical connections (Merlo 2006, 33). If there is in-deed an exchange between politicians and politicallyconnected firms, one can expect politicians to benefitfinancially from office just as firms do from connectionsto office holders. However, this perspective has beenlargely overlooked so far, presumably because estimat-ing the financial benefits of political office is challengingempirically.

In this article, we measure the value of politicalpower in postwar British politics using data about theestates of British politicians who entered the House ofCommons between 1950 and 1970 and often servedwell into the 1990s. We identify the effect of officeon wealth at death both by controlling for a widevariety of candidate-level characteristics and by em-ploying a regression discontinuity design that exploitsthe quasirandom assignment to office that takes placein close district races. We find that serving in Par-liament almost doubled the wealth of candidates ofthe Conservative Party, but had no appreciable effectfor Labour candidates. These financial benefits of of-fice are likely attributable to payments from privatefirms to sitting legislators and lucrative employmentopportunities provided to politicians after retirement.Conservative MPs financially benefited from director-ships and consulting work that accrued to them asa result of serving in political office. Labour politi-cians had explicit relationships with unions that werefar less lucrative; we surmise that Labour MPs werepaid less for political services because the trade unionswere better organized and secured their services bycontrolling the party rather than by paying politiciansdirectly.

Although our application benefits from data re-sources unique to the UK, our general approach isbroadly applicable and could be used to measure thefinancial returns to office in other political systems.Faccio (2006) shows that the strength and scope ofpolitical connections, as well as the benefits of theseconnections to firms, vary widely across countries. Onemay expect the political power premium to vary basednot only on these features, but also on the organiza-tion and financing of political parties, the degree oflegislator independence (both from party leadershipand from specific interest groups), and the extent ofrestrictions on legislator conflict of interest.

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